Will Larson's Web Page

Vox EU Article

NBER working paper released

http://www.nber.org/papers/w15455

Is Newer Better? Penn World Table Revisions and Their Impact on Growth Estimates

Simon Johnson, William Larson, Chris Papageorgiou, Arvind Subramanian

This paper sheds light on two problems in the Penn World Table (PWT) GDP estimates. First, we show that these estimates vary substantially across different versions of the PWT despite being derived from very similar underlying data and using almost identical methodologies; that this variability is systematic; and that it is intrinsic to the methodology deployed by the PWT to estimate growth rates. Moreover, this variability matters for the cross-country growth literature. While growth studies that use low frequency data remain robust to data revisions, studies that use annual data are less robust. Second, the PWT methodology leads to GDP estimates that are not valued at purchasing power parity (PPP) prices. This is surprising because the raison d’etre of the PWT is to adjust national estimates of GDP by valuing output at common international (purchasing power parity [PPP]) prices so that the resulting PPP-adjusted estimates of GDP are comparable across countries. We propose an approach to address these two problems of variability and valuation.

Finished the new and improved EPI!

I just finished constructing a new and improved Export Price Index for U.S. counties and cities. The EPI is a Laspeyres-type price index measuring the terms of trade of a region. The weights are from QCEW data, and the prices come from PPI (SIC), PPI (NAICS), PPI (Commodity), and the CPI (urban consumers). For more info, check out http://papers.ssrn.com/sol3/papers.cfm?abstract_id=9252.

Documentation to follow at some point…

Things I’ve Learned in Grad School (thus far…)

As I approach the end of my 4th academic year, I’m still learning new things every day.  I’ve written more equations, more lines of Stata code, and read more articles than I’d care to admit, given what I have to show for it.  What I’m realizing though, is that in doing all of this work, I’m learning HOW to do research as much as actually doing it.  Here are the things that I’ve learned so far in grad school, not in any particular order.

1. Prioritize your time.  More than just “make room for a work/life balance” I mean organize your time around what type of work to accomplish. Dissertation research is about both the forest and the trees, and I’ve found that at times I can lose sight of one or the other pretty quickly. My weekly schedule looks something like this.:

• 1 day: go to a coffee shop with no electronics. Just bring 4 or 5 articles and a notepad. Think, read, and write (by hand! so old school!)
• 2 days: (more or less as needed) work from home, usually working with data or math. It’s much less distracting there and I can get a lot of real work done there.
• 2 days: (more or less as needed) go to campus, attend seminars, reading groups, and talk about yours and others’ topics.  This is more social and network-oriented as opposed to actually getting stuff done. Nonetheless it is critical to be on campus with positive spillovers abound in the form of hallway chatter, seminars, lunch, coffee, and whatnot.
• 1 day: play basketball, play cards, drink, do something other than econ!!
• 1 day: do errands, get ready for the next week.  Getting ready for the next week is important so I hit the ground running on Monday. A lot of people waste Mondays trying to figure out what to do for the week. Mondays for me are my most productive days because I spend a little time Sunday night preparing.

2. Don’t get involved with too many projects. I’ve found the hard way that spreading yourself too thin is a recipe for disaster and a great way to spend more time in grad school than you’d originally intended.  At first, I did everything that anyone wanted me to do because I was hungry for ideas and to undertake some serious research. Now, it’s all about wrapping up those prior commitments and clearing room, both in my schedule and in my head, for my dissertation and only my dissertation.  Some past projects have been valuable and extremely interesting, but the point of grad school is to complete a dissertation. Once you know what your topic is, clear your schedule as fast as you can to get it done.

3.  Try not to do work on projects you don’t care about.  This may sound obvious, but there are a number of reasons why you could get wrapped up in projects that you find interesting from an academic standpoint, but are not passionate about.  The worst thing in the world is perfectionism combined with apathy.  If you find the inital intellectual curiosity of a topic fading and become apathetic, it is difficult to do it well. If you have high standards for your own work (likely, given that you’re in grad school), this will be a maddening experience.

4.  Use your flexible schedule to your advantage! I spent a total of 8 weeks last year in Montana, 3 weeks in New York, and nearly 2 in Ireland.  For a good portion of the time I was in Montana and NY, I was working on RA projects, pre-dissertation research, and an IMF contract. This is the 21st century, folks. We are in a golden age of cheap telecommunication and air travel. Use it.

5. Stand on the shoulders of giants! To use another cliche, don’t reinvent the wheel! By these, I mean that you should use the literature. If someone else has said it before, cite them and use their models/methods/data if at all possible. That way, 1) you borrow other peoples’ credibility, making your approach easier to defend, 2) you save time, 3) it shows a scholarly understanding of economics, and 4) this way, you are actually contributing to economics as a science.  Arbitraging theories and empirical techniques from different subfields is my favorite.  It takes very little original thought, just a bit of creativity. Just mix flour, sugar, baking powder, milk, eggs, salt, oil, cook it up, and boom-pancakes. If people have done work on a topic you’re working on, great! You can either use them as a straw-man or as a launching point for bigger and better things.  It is everyone’s dream to come up with an empirically testable unifying theory of economics, and you can do that later. Grad school is about learning research METHODS, figuring out what you like, and getting the PhD done. That’s it.

That’s it for now. I’m sure I’ll come back later and add to or change some of these.

Now to get that damn dissertation done…

Luck Adjusted Pitching

I’ve been working on creating some statistics for pitchers that take out some of the effects of “luck.”  This allows pitchers to be more accurately valued and ranked according to underlying ability. The methodology is very simple, but it’s interesting how such simple estimates can tell you when a pitcher is for real (Tim Lincecum), if he’s just lucky as heck (Cliff Lee), or if he’s got the short end of the stick (Javier Vazquez).

Here is a very rough draft of the methodology
Here is an accompanying table in PDF format.
Here is an accompanying table in XLS format.

This is what Econ PhD candidates do in their spare time during the baseball offseason…

The Smartest Guy in the World

http://econ-www.mit.edu/files/3703

from

http://baselinescenario.com/2009/01/08/causes-economics/

2008 Year in Review

Howdy everyone!

2008 has been a good one. This is how it went down:

Winter

• Bring in the new year at the Brew Pub in Billings, MT
• Obama starts stringing together primary wins
• Present the “Energy Efficiency” paper at the GWU micro-seminar
• Maeve and I go to the “Flying Dutchman” at the Kennedy Center

Spring

• Opening day at the new Nationals Stadium. Zimmerman hits a walk-off HR in the bottom of the 9th with 2 outs for the win.
• Present the “Energy Footprint” paper at the ARUEA Mid-Year Meetings
• I go to Seattle to hang out with my Whitman pals. My golf game sucks but I still almost beat Johnny, the newly-minted PGA Apprentice. Druid’s Glen is an amazing course. I get schooled at poker.
• Finish up my 3rd year of grad school
• Sloane and David Rosenthal get married.
• I go in with my folks on a condo at Jenkins Row. In hindsight, it could probably have been had a bit cheaper, but then who saw the crash of September/October coming?
• My cousin Courtney graduates from college at Southwestern and we all are there to celebrate with her.
• Brad Hansen moves to Washington to start his internship. We have a blast!
• My sister Erica comes out to DC to visit (yay!)
• My brother David drops out of high school, gets his GED, applies for college, gets in, and starts classes in the fall!

Summer

• Tom and Tricia Laducci’s wedding in Peabody, MA (congrats again guys!)
• Go to Syracuse to hang out with Maeve’s family for a couple of weeks. I try to golf, but on my 10th swing or so on the driving range, my neck seizes up in spasms. No fun.
• Go to Montana to hang out with my Dad’s side. My golf game is improving. I shoot a 71 in the Cottonwood Hills Pro-am (beating Dad, who shoots a 72), and announce my retirement from golf for 2008 to spend time with family.
• My step-sister Rikki and Joe Rowe get married at the Holland Lake Lodge just outside of Seeley Lake, MT. It is BEAUTIFUL and a great time.
• Maeve and I go to Ireland, with stops in Dublin, Derry, Galway, and Doolin. I think I had about 20 Guinness over the course of the trip, and looking back on it, I probably should have had more. Good stuff.  I also come out of retirement to play at the Doolin Pitch-n-Putt (longest hole, 95m). I electrocute Maeve (don’t ask).

Fall

• 4th year of grad school begins (!) without a dissertation topic, but with numerous research projects in the pipeline.
• The stock market goes to hell. Economists usually like a little bit of a downturn because we supposedly know how to fix it, and thus we are in high demand. What we DON’T like is when the downturn and crises get so big, people stop having money to pay us.
• I present the “Energy Footprint” paper at a GW Micro Seminar.
• Maeve and I witness ND crush Michigan and Charlie Weiss get his knees shredded.
• Grandma Larson passes away at the age of 90 :(  In Fort Benton, MT, she is laid to rest. Earlier that morning, I become godfather to Maya Oliva North, the cutest little gal that will ever walk (crawl?) the earth. I discover that I’m a member of the Episcopal Church because I was baptized there as an infant.
• Sarah and I go to a Bobcats game where they get beat pretty badly. Can you believe that was my first MSU game?
• Maeve and I go to Seattle and she meets all of my college buds. In her first poker game ever for money, she won a lot of money (I think $40 on a $20 buy-in), but more importantly, I win more ($35 on a $10 buy-in). We see ND crush UW. UW has 55 yards with 8 minutes to go in the 4th quarter.
• Obama wins! Obama wins!
• Thanksgiving at Leslie’s. We made lots of potatos

Winter

• Maeve and I FINALLY have our housewarming party. It is a pretty big hit I think.
• I enter the world of the stock market and open an E-Trade account. Currently, the S&P hasn’t been lower than the day I bought shares in it. Woohoo!
• I help present the “Data Warnings” paper from my days at the IMF at Princeton. It is a blast.
• I finally settle on a dissertation topic: “Essays on Regional Employment Shocks” (title and content subject to much revision)
• Christmas at Mom’s!
• New Years Eve downtown with Kevin, Ashley, Sarah, and anyone else we meet up with.

I think that about sums it up, albeit in crude, bullet point form.  I feel like this year professionally was sort of a realignment year. By that, I mean it was the final shift from Will Larson the MA Student to Will Larson the PhD Candidate, and it hasn’t been an easy transition.  The focus has shifted from answering questions, to finding questions that haven’t been asked, that need answering, that can actualy be answered, and can be answered by me.  Not easy…

On a personal level, 2008 saw Maeve and I greatly expand our carbon footprint by traveling all over the world, buying a condo, and nesting (thank you JC Penney, BB&B coupons, and the recession for low prices everywhere).  We are truly blessed to be in such a situation that enables us to work, live, and travel in such a way as we do. Next year, we hope to see a finish line for our dissertations and go on the job market in the fall.  Hopefully we can find some good jobs in DC.

Take care everyone! I’m excited for 2009 and what it brings!!

All the best to all of you!

Love,
Will

Everything you wanted to know about the economy, but were afriad to ask.

Some holiday reading:

http://blogs.wsj.com/economics/2008/11/11/guest-post-an-economic-strategy-for-obama/

http://baselinescenario.com/2008/12/22/one-world-recession-ready-or-not/

http://www.nytimes.com/2008/11/09/business/09frank.html

Home, Sweet Home

On Wednesday I arrived in Montana for the holidays.  It’s Sunday now, and it hasn’t been above 10 degrees. Yesterday, the high was -7 and the low was something like -20.  I had antelope steak last night and venison sausage this morning for breakfast.  The night before, I had a “yo burger” at the Korner Klub which is a burger with a fried egg, a ham steak, and cheese on it.  Last, but not least, the Broncos are on local TV as opposed to the Redskins or the Ravens.

It’s so good to be home

Now we’re talkin’!

The Fed just cut interest rates to “between 0 and .25%” http://news.yahoo.com/s/ap/20081216/ap_on_bi_st_ma_re/wall_street

This won’t fix everything because real interest rates are too high because of deflation. Next up comes the “printing money like we’re Zimbabwe” part to try and get a bit of inflation back into the economy.